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Parents: How Much College Do You Owe Your Kids?

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By Julie Halpert, The Fiscal Times

September 26, 2012

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When Ray Legere's daughter was accepted to the University of Maine last spring, a school that costs $40,000 a year, she was eager to go. She attended an affluent public high school in Niskayuna, New York, and the pressure from classmates to attend a pricey school of her choosing – anywhere in the country – was fierce.

Legere said his daughter felt an expensive school was a given. Instead, he was pushing for her to attend a state school close by, the University of Buffalo, maybe, which cost only $17,000. Though he could afford the higher tuition, he gave her a choice: He’d pay the full cost of a state school, but if she attended the costlier college she’d have to take out loans.

Legere, a businessman, sat his daughter down and ran the numbers. He explained she would need to take out about $30,000 in loans a year. He estimated that paying a total of $120,000 in loans for 10 years at 4 percent interest would cost her $1,200 a month, or the first $9.00 an hour from her salary for 10 years.

"It's like buying a new car, driving it into a river at the end of the year, and having nothing to show for it," Legere recalls saying. "I told her it would be fiscally irresponsible of me to let her assume that debt." The day after that conversation, the young woman texted her mother: Please send a deposit to the University of Buffalo.

Similar family conversations are playing out in many households across the country, as parents struggle with trying to get their children to their dream schools without incurring backbreaking debt. Some parents, like Legere, are practical and feel comfortable setting financial limits, while others have mortgaged their homes or dipped into their retirement savings rather than nix their children's first choice.

These conversations between parents and children are "a good deal more common," says Brad Sachs, a Columbia, Maryland, family psychologist and author of Emptying the Nest: Launching Young Adults Towards Success and Self Reliance. The combination of a steep increase in college tuition and the recession "conspired to put many families into very difficult territory about what to subsidize," he said.

Guilt and a sense of obligation can cause many parents to put themselves in a precarious financial situation. Some, having underwritten their children's many endeavors – from violin to ice hockey lessons – want a big payoff at the end, he says, adding that many are eager to live vicariously through their offspring. Others worry that denying their children access to the best (and likely most expensive) schools could hurt their career prospects in a hyper-competitive job market.

WHEN FINANCIAL AID IS AN OPTIONMaura Kastberg, director of student services at RSC, a college prep program in Schenectady, New York, says she's seen many instances where students are accepted to schools willing to provide substantial financial aid, while their first-choice schools, of comparable quality, offer little. Parents will often agree to send their children to the school offering a poor aid package, take out a second mortgages or even dip into their retirement funds, since they feel guilty about not being able to afford the dream school. "It's emotionally gratifying to the parent and the student, but from a dollars and sense view, it’s a big mistake," says Kastberg.

Robert Bardwell, director of guidance at Monson High School in Monson, Massachusetts, says many couples whose own parents sent them to their first-choice school feel that same obligation toward their kids. He says parents sometimes secretly root for their child not to get into the pricey dream college because they’re not sure how to say no if they do. In some cases, a family will drop their child off at the college – then head to the financial aid office, saying, "I don't know how I'll pay for this."

Bardwell knows of other parents who send in multiple deposits to various schools, hoping their child will eventually decide to go to the less expensive university. "That's just nuts," he says. "You have to learn to say no to your kid at some point."

This generation of young adults has been more indulged than most, says Jane M. Healy, an educational psychologist in Vail, Colorado. In another era, the question of whether parents should go into tremendous debt to send a child to a school of their choice would be "preposterous." The answer would have been, "Of course not." But this is a "spoiled generation of parents who are spoiling their children and can't bear to see them struggle," she says. This sets kids up for failure in the workforce when they'll need to cope with situations that parents just can't solve. Parents shouldn't feel badly if they veto pricey schools, since setting limits is part of being a good parent, she advises – plus those kids who do have a financial stake in their education are likely to work harder to do well.

That was certainly the case for 22-year-old Kelli Lampkin, who graduated from Florida State University this past spring. She paid for it herself, including an internship in London, and held as many as six jobs during college, taking out $30,000 in loans and winning as much in merit-based scholarships.

She was ineligible for need-based scholarships because her parents had resources, but they chose not to pay her way. "I don’t feel it’s my parents’ responsibility to pay for my education," said Lampkin. Six weeks ago, she landed a full-time job at a software company in Boston, making $50,000 year, plus benefits, stock, commission, and a bonus. "This investment in myself helped me stand out to employers and I graduated with my choice of employers," she said.

LONG TERM REWARDSCarl Hindy, a psychologist in Nashua, New Hampshire, who just sent his fourth and youngest child off to college, spent many a sleepless night worrying about whether his child's dream school would come through with enough aid. "When those acceptance letters start coming in, and we don't yet know what financial aid will be offered, there's a lot of talking and handholding," he said.

He encouraged his children to aim high and apply to the best schools without knowing what kind of assistance they’d get. "I'm not one to spend retirement money or mortgage the house to pay for college," he said. Ultimately, he found that the private schools offered enough aid to make it nearly comparable to a state school, though his children are taking out roughly $30,000 each in loans. And he believes the schools his children attended, which include Yale and Cornell, offer greater long-term benefits in terms of alumni connections and networking activities than state schools.

But others who have multiple children in college simultaneously find that state schools are the best option. Denise Altman, who owns a behavioral consulting firm in Denver, North Carolina, has a blended family with two of her own biological children and two of her husband's. Knowing they were to have four in college at roughly the same time, they told their children that they would cover half the cost of a state school—$3,775 per semester—but they would need to ask their other parent for the remainder or find a way to finance it themselves. Though they could have afforded to pay the entire tuition, they wanted the children to better appreciate their education. "We felt it was their responsibility to figure it out themselves so they'd have some skin in the game," she said. Her oldest is now in law school, paying for it herself, while the other two graduates are employed and the youngest will graduate in December.

For some, economic circumstances force their hand. Mike McIntosh planned to send his daughter to her dream school, Johns Hopkins, in the fall of 2009, but she also applied to the University of Michigan, located in Ann Arbor where her family lives, “just in case.” While she was accepted into both schools, the family trucking business was tied to the domestic auto industry and had just started to collapse. That made it nearly impossible to pay the $55,000 in tuition at John Hopkins. So he had to break the news to his daughter that she had to attend the University of Michigan, at nearly a third of the cost. "She was devastated at first, but put her best foot forward." Now a senior at the University of Michigan, she's planning to apply to Medical School.

Bridgette Mongeon, a sculptor in Houston, Texas, gave her two children a choice. They could foot the entire bill for college, or she would pay for it and forego her retirement plans. "So I would be coming to live with them when I was old. Each child opted for paying their own college!" she said. Having them fund it "made the reality of their responsibility to the endeavor more real," she said.

Family discussions about college costs offer the opportunity for a "teachable moment," says Patrick O'Connor, associate dean of college counseling at the private Cranbook-Kingswood Upper School in Bloomfield Hills, Michigan. Parents can help guide the decision, letting their children know the options available to them and the possible consequences of each.

"The takeaway for parents and students is twofold: An education is very important, but weigh the investment and pay-off," says Riva Froymovich, author of the upcoming book, End of the Good Life. "Generation Y can't afford to dream wildly anymore or expect that anything is coming to them. It's okay for parents to let their children know this."